Is ethics in business situation specific, and if so what are the implications?

“Everybody’s ethics are different”, claimed Richard Desmond, owner of the Daily Express. He was being put on the spot to say what ethics meant to him. Desmond

His much derided response landed badly. Particularly at the national enquiry examining the ethics, or lack of them in the media and especially at News Corp, and News of the World.

Yet in many ways, Desmond had a point. Social psychologists argue that ethics is not global. They say it stems from time and culture. At any given time or place, each individual has their own unique insight into what it means.

This makes ethics: situation specific.

For example, in a culture that cherishes conformity, correct behaviour may mean stopping doing something, when the right thing  to do is to carry on. For instance, helping someone even when the culture suggests stay silent or don’t do it.

Doing what’s right comes down to who you are, and the decisions you make. You cannot look at other people or processes to make you do the right thing. Yet concluding that ethics in business is something business leaders can ignore, remains entirely wrong.

Ethics is fundamental to who we are. It’s buried deep within us. Hardly surprising that Desmond and others argue it’s too complicated for busy people like them to deal with.

rotten applesA good case of ethics being situation specific is when there’s pressure for obedience to authority. Some of the “bad apples” in  the financial system manipulating Libor and Forex rates, publicly complained, “how were we supposed to know what we were doing was wrong when our managers and supervisors were busily encouraging us to do it.” 

Such pressure also may explain why nobody spoke up in VW about cheating over emissions.  Or in Welles Fargo, where thousands of employees submitted to management demands that were both unethical and detrimental—bad for the people those staff were meant to be serving.

Similarly, Enron, Shell, Tyco, WorldCom were all cases where  organisational obedience loomed large. If everyone had paid more attention to ethics, corporate disaster might have been avoided, or perhaps lessened in impact.

The downside though, was everyone would have lived with a far higher degree of uncertainty and risk. Rather than seeing things as being black and white, right or wrong, people would have suffered more stress in unraveling the correct behaviour.

Hardly surprising then that many business people resort to: “Let’s just get on with the important task of making money!”

Yet the issue keeps returning. Everywhere in business leaders are finding it won’t go away. And for three good reasons:

  • Ethics is good for the company’s bottom line
  • Business should be ethical because it’s the right thing to do.
  • Business decisions affect others; it’s how we identify and choose different courses of action and sensitivity to different consequences.

One response to this challenging landscape is to adopt hard and fast rules, or formal codes of behaviour. If ethics is largely influenced by the situation, then what a company needs is understandable rules and frameworks. These can at least guide people in the right direction.

The trouble with this response is it doesn’t work. Ethics begins where the codes and practices end.  As Mr Desmond pointed out this comes from within, when interpreting what society expects.

Education, education, education

This all adds up to a need for proper ethics education–both before one lands a job in a company and afterwards.

In 2010, the world Economic Forum reported the top five reasons for not collaborating or doing business in India. Of these five, corruption was rampant and therefore a major factor for avoiding doing business with Indian companies.

Indian companies in particular face enormous pressures to cope with making an impact in the global market. To compete they must adopt sound ethical governance and ethical leadership.

Such companies need to instill in employees the importance of ethics and integrity in business. They need to offer help for otherwise confused staff who, seeing corruption all around, may conclude: “it’s OK” within their own company.

Some Indian firms in particular now fully embrace the importance of integrity, transparency and open communication. A major study in 2010 even complimented the top 100 Indian firms as “role models” for the others around the world.

To deal with Desmond style objections about ethics, companies must therefore stop assuming ethics is strictly an individual affair.  

In India and elsewhere, currently the main approach to managing ethics revolves around compliance. The trend is to adopt ever more sophisticated computer monitoring systems. That includes deeply embedded artificial intelligence to monitor and report on actual or potential rogue behaviour.

Yet what’s needed is simply ethics education–both for those joining companies and for those already employed. Ethics education for all professionals needs to become compulsory.

Within many companies regular education on ethics seems barely acceptable. At most, what happens is a once-a-year effort reminding people about codes of practice and the core values of the organisation.

In contrast, the most astute, and growth-minded companies take a different approach. They commit to constant education about ethics, with regular learning events for all.

The most committed firms ask all company teams to spend time at least once a month talking about the importance of integrity and the meaning of ethics in their particular part of the business.

Or they invite groups of employees to regularly consider different scenarios in which they can work through actual examples of ethical uncertainties. Below is a version originally developed at BAE to promote ethics at work:

Ethics scenario 1

This does not make ethics a big issue. Instead the emphasis is on better decision making, All BAE employees know and use the company’s ethics decision framework.  This framework is both appealing in its simplicity and clarity.

Decision framework2

More on ethical decision making at: http://tinyurl.com/z4dolsh

 

Sources:

K.April et al, Ethics and Leadership: enablers and stumbling blocks, Journal of Public Affairs, 25th May 2010

S.Pushpa, Ethical Leadership: Need for Business Ethics Education, Int. Journal of Advances in Management and Economics, Jan 2012

P Capelli et al, Leadership lessons from India, HBR, 2010

 

 

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